| Daily Forex Technicals | Written by FOREXYARD | Sep 19 08 07:12 GMT | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HeadlinesCentral Banks Decide to Help Market Stability Due to the coordinated effort of six of the world's top central banks, the market may begin to stabilize. The banks decided to pump $247 billion into the global economy to help calm stock markets across Europe and the United States during this recent financial crisis. Traders may see volatility as this decision is assessed during its initial implementation. Market Trend
Economic NewsUSD - Paulson's Announcement Creates Hope for a USD Rally The USD saw mixed trends against all of its currency counterparts yesterday during an unusually volatile trading session. Against the JPY, the USD was up 1% at 105.36, while against the EUR the greenback recovered from its initial losses during the early trading sessions. This is mainly because the greenback is still suffering from the meltdown of some major American financial institutions. The USD did obtain some relief, however, after stock markets rallied worldwide. This was in large measure due to the coordinated effort of six of the world's top central banks by pumping $247 billion into circulation to calm stock markets across Europe and the United States. Also contributing to the USD's rally was the proposal of US Treasury Secretary Henry Paulson to come up with a plan that would help eliminate bad mortgage-related debt. The main idea will be to create a body that will deal with today's financial crisis similar to what was done during the savings and loan crisis of the 1980s with the establishment of Resolution Trust Corp. As a result of Paulson's announcement, stock markets worldwide witnessed one of the largest jumps in recent days and the USD began a strong rally. In other economic news yesterday, the US Unemployment Claims figure was released and showed an unexpected rise to 455K from 445K in the last week, contrary to market forecasts. Traders should keep an eye on the EUR and JPY as indicators of the strength of the USD today as analysts are expecting a large amount of volatility during today's trading sessions while investors follow closely the development of this recent financial crisis. EUR - Will the Euro-Zone Consider Cutting Interest Rates? Yesterday, the EUR saw a very volatile trading session with mixed results against its major currency counterparts. The EUR rallied against the USD during early trading sessions as the European Central Bank (ECB), and other central banks, sold USD to pump liquidity into the global financial system. However, during later trading sessions the EUR lost its early gains after US stock markets landed a strong rebound. The EUR also rose 1.2% against the JPY to finish the day at 151.22. The expectations of an ECB early cut of Interest Rates continues growing amid fears that global financial crises will seriously dampen economic activity in the Euro-Zone. Economists didn't expect the ECB to cut official rates this year given the recent Euro-Zone inflation, which now sits at a record high of 4% for the last few months. The recent report that economic growth will fall below 1% in the Euro-Zone next year, and the ECB joint liquidity action with other central banks, is making a rate-cut more probable in the Second Quarter of 2009. Traders may expect the ECB to contemplate such a move if this recent financial crisis worsens. Today will be a very quiet news day for the EUR as only one economic figure will be released. The German PPI, which measures the change in the price of goods sold by manufacturers, is forecasted to be lower than the previous month's. Traders should follow the development of the other currencies, the GBP and JPY primarily, as they will also affect the EUR's volatility today. JPY - USD-Supplied Money-Market Operations Introduced to Japanese Economy The JPY underwent a bearish trading session yesterday, as it depreciated against all of its major currency rivals. In early trading, the Asian currency rallied against the USD, backed by unwinding carry trades, as investors abandoned the JPY to purchase higher yielding, yet riskier, assets. After the joint action by the world central banks to inject liquidity into the market, the JPY was no longer considered a safe haven because such a move made the risk of global currencies decrease significantly. The USD rose 1% against the JPY, closing at 105.36, while the EUR rose 1.2% to 151.22. Another major initiative that was enacted yesterday came from the surprise announcement that for the first time in its history the Bank of Japan will introduce USD-supplied money-market operations in an effort to deal with strong USD demand. In other news, traders saw the release of the Bank of Japan's (BoJ) Monthly Report yesterday, which stated that it has cut its assessment of business investment, citing low corporate profits. The BoJ also reiterated its view about a sluggish economy in part because of high energy costs and weakening export growth. Today, the JPY will be absent from the economic calendar and traders are advised to follow global developments instead. It would be wise for traders to follow the USD, EUR and GBP today as they are more likely to determine the JPY's movements Oil - Oil Prices Float in Expectation of Market Direction Has the upswing in the price of oil met its peak? Those trading on Thursday saw a continuation of the previous day's rally in the price of Crude Oil. Due primarily to a weakened dollar, Oil jumped from $91 Monday, to $98 Thursday, before showing any signs of reversing. Now the market is beginning to see this price float around the $97 mark while traders assess the direction of the USD before the weekend. As a result of yesterday's announcements that various central banks would begin to pump billions of dollars into the market, we may see a reversal to the price of Crude Oil, but it is still too early to tell if this action will have the desired effect. So long as the direction of the major currencies remains uncertain, commodities like Oil will be bought up by traders looking to stash their money in a safe place. This will continue to drive the price of oil higher and higher. Traders would be wise to keep an eye on the direction of the USD today. If the dollar rallies, we may see a drop in the price of Oil. If not, look for Oil to continue climbing. Technical NewsEUR/USD The pair has breached the key Fibonacci level of 1.4400, and the break has been validated by a full bar beneath that level on the 4-hour chart. The negative slope on the 4-hour chart's Slow Stochastic strengthens the notion that the momentum is quite bearish. Going short might be wise today. GBP/USD The pair is in the middle of a very intensive downtrend that still shows great momentum and on a bigger scale appears to have more room to run. The hourly chart is showing a strong bearish cross, and the 4-hour chart is also joining to that notion with the Slow Stochastic pointing to the continuation of the bearish movement. Being on the sell side appears to be the right choice today. USD/JPY The pair is showing local bullish momentum on the hourly level after a violent hike to the 107 level. On the daily chart, the pair has been range trading with high volatility for a while now and it appears that the bullish price movement might be back. The Slow Stochastic and the RSI of the hourly chart are indicating an upcoming test of the 107.80 level. If that level is breached, swinging in the trend would be the best strategy USD/CHF The pair has breached through the Fibonacci key level of 1.1100, and all oscillators on the 4-hour chart are indicating further bullish movement. The hourly Bollinger Bands are showing that the price has crossed its upper border, signaling that the current trend will probably continue, as the pair's new target price might be 1.1250. The Wild CardCHF/JPY There has been a strong breach through the upper level of the bearish channel on the 4-hour chart and the momentum on the daily chart is now bullish. There is also a very strong bullish cross forming on the 4-hour chart which indicates the continuation of the bullish channel. The RSI supports that bullish notion and it appears that the next target price might be around 97.00 Going long appears to be preferable strategy for forex traders today. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Friday, September 19, 2008
Daily Forex Analysis
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